"Our only concern is that we're not able to get this into people's hands fast enough," Dorsey said to CNNMoney this week, promising that Square will get the dongles into the hands of their beta testers early this summer. The app and dongle will be free, though it is not yet clear what Square will charge on every transaction.

Square has $10 million in venture capital so far, according to crunchbase.com, and differs from products like Mophie's Marketplace and card-reader behemoth VeriFone's PAYware Mobile which are more oriented towards retailers. Square, in comparison, is made for small transactions between people, and doesn't require you to open a merchant bank account. If someone buys something from you on Craigslist, for example, but is short on cash, he could just let you charge his credit card. He signs on the screen, and photo verification lets you confirm that the card isn't stolen.

Square's dongle is about the size of a quarter, and plugs into the iPhone's audio jack. The card reader modulates the data from the card's magnetic strip, which is then demodulated and processed by the accompanying app. Using the headphone jack allows the same dongle to be used for all smartphones, and Dorsey says that the company intends to have apps for Android and Blackberry phones as well as, ultimately, Macs.

"Signing up for Square is just a matter of putting your name and address and picture in our system," Dorsey says. "What we're trying to do is remove friction from every part of the process." You can apply to be participate in the public beta on Square's website.